Page 61 - Fortune-November 01, 2018

may not be reflected in short-term perfor- THE FUTURE 50 With high potential, high risk
mance. That said, early results are encour- The very attributes that make high
aging: Since their selection last October, the growth possible often also increase risk.
2017 Future 50 have achieved average rev- One cautionary example: While last year’s
enue growth of 18% and total shareholder Future 50 companies are outperforming
returns of 35%—outperforming both the in the aggregate, three—LendingClub,
overall market and growth-focused stock Gogo, and Macom Technology Solutions—
indexes. (See the chart at right.) have lost half their market value since
publication.
Global patterns of vitality Many high-growth companies are led by
Our 2017 ranking assessed only U.S. founder-CEOs, who face the challenge of
companies. This year we expanded our preserving culture and momentum while
scope to include the largest public compa- transitioning in the leadership role. Tech
nies worldwide. We found a bipolar giants face trust issues, as users become
landscape. The vast majority of this year’s 2017 Future 50: increasingly sensitive to the social and
Future 50 are headquartered in two 1-Year Total political implications of digital products
countries: 42% each in Greater China Shareholder and increasing market power. And macro
(including Hong Kong) and the U.S. Return concerns, such as trade disputes, fears of a
This distribution may seem extreme, slowdown, and the impact of government
but it is in line with growth trends. Of the 35.1% influence on the economy, are more salient
fastest-growing large companies over the than ever. (Such concerns have impacted
five years through 2017, 54% were based the share prices of many companies on this
in China, and 28% in the U.S. Growth- year’s list, especially in China.)
focused investment follows a similar To calibrate these risks, we have stratified
22.9%
pattern: In the first half of 2018, approxi- our ranking. We classified four compa-
mately 80% of venture capital funding nies—Samsung Biologics, Tesla, Facebook,
went to those two countries, according to and JD.com—in a “higher uncertainty
12.9%
Crunchbase. zone”: Though they score well in our vitality
Vitality is also unevenly distributed by analysis, each faces circumstances that el-
sector. In the U.S. and other developed evate the risk that their growth could derail.
markets, the vast majority of vital com- The Future 50 can’t predict success with
panies are tech players. But in China and certainty, of course. Evolving markets, new
other emerging markets, the picture is competitors, and external forces always
more varied, thanks in part to rising con- have the potential to disrupt trajectories.
sumer demand from the growing middle S&P 1500 But we believe this index provides a useful
class. While digital leaders such as Alibaba, S&P 1500 I.T. SECTOR 2017 FUTURE 50 set of binoculars through which to recog-
Baidu, and Tencent rise to the top, there nize growth potential in volatile times.
are also three Chinese automakers among
our top 50, along with a consumer-oriented Martin Reeves is a senior partner at
Indian bank and a Thai convenience- management consulting firm BCG and the
store operator. SOURCE: S&P GLOBAL director of the BCG Henderson Institute.

gic orientation from its Technology and that portfolio’s digi- People: We assess smaller board size.
SEC filings and annual investments: A com- tal intensity (share in the age and tenure of
reports. We assess the pany’s capital expen- computing and elec- a company’s execu- Structure: A com-
clarity of a company’s ditures and R&D (as a tronic communica- tives and directors, as pany’s age and (rev-
strategy from earnings percentage of sales) tion). To account for well as the share of enue-based) size are
calls. We also assess measure its investment external innovation, a managers and employ- correlated with vitality
a company’s commit- in the future. Technol- company’s portfolio of ees who are female. loss. But three-year and
ment to sustainabil- ogy advantage is as- startup investments The value of consis- six-month sales growth
ity from its governance sessed through the is compared with the tent, focused manage- can be predictive of fu-
rating by Arabesque, a growth in a company’s best-performing global ment is assessed via ture growth as signs of
data-analytics firm. patent portfolio and venture capital funds. leadership stability and revitalization.

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